Some SMSF members are a risk of losing insurance cover on 1 July 2019, the SMSF Association has warned.
Under legislation passed in February, members of APRA-regulated super funds with an account that has been ‘inactive’ for 16 consecutive months will lose insurance cover unless they specifically direct otherwise.
While this doesn’t directly impact SMSFs, the Association is concerned that SMSF members who keep accounts in APRA-regulated funds for the purpose of insurance are at risk of losing the cover.
“We are worried that some SMSF members will lose their life insurance cover because they have not checked correspondence from their APRA fund or contributed to it,” said SMSF Association CEO John Maroney.
“This could have a devastating impact on policy holders or their beneficiaries if their insurance cover is unknowingly terminated. Furthermore, it may be extremely difficult and costly to try and access insurance at a later stage.”
“It is therefore imperative that SMSF members wishing to maintain their life insurance cover do so now by giving direction to their APRA-regulated fund that they wish to opt in.”
“The other option is to make a contribution or a rollover into the ‘inactive’ APRA-regulated fund so that the period when a fund starts to be inactive is reset. But even if this approach is adopted, we recommend that SMSF members opt in.”
Super funds have been contacting members about these changes, which aren’t limited to life insurance.